We’ve often written about the Bakken, Marcellus, and the Eagle Ford shales, and recently we’ve even been talking about the Monterey shale.
In comparison, you don’t often read about the Haynesville shale, which covers parts of northwestern Louisiana, southwestern Arkansas, and eastern Texas. In recent times, activity has picked up over there, which means you should have a good idea of what to expect and what’s going on right now.
One reason the Haynesville hasn’t been hitting the news is that although it was estimated to contain natural gas, the formation’s low permeability led geologists to believe it was actually a gas source rock rather than a gas reservoir. Now, however, the picture has changed dramatically.
More recently, Chesapeake Energy Corp. (NYSE: CHK) stated it would sell off its producing and as-yet undeveloped oil and gas assets in both the Haynesville and the Eagle Ford shales to EXCO Resources, Inc. (NYSE: XCO) in a deal worth about $1 billion, reports RTT News. Under the terms of the deal, Chesapeake will receive about 90 percent of the proceeds when the deal closes and the remaining 10 percent after some formalities have been completed.
As far as the Haynesville is concerned, the Chesapeake deal includes 9,600 net acres in the Desoto and Cado parishes—worth about $320 million. These regions have been producing around 114 million cubic feet through May this year. EXCO will be funding the Haynesville deal under its current credit agreement, though it’ll receive financing from J. P. Morgan & Chase Co. for the Eagle Ford part of the deal.
With this latest deal, Chesapeake has brought its year-to-date asset sales up to $3.6 billion (including deals either completed or at the signing stage). It looks like Chesapeake should have no problem financing its capital expenses for this year.
Shale Gas and the Transformation of American Energy
Now, shale gas should need no introduction in general. Production from wells drilled in shale formations has increased 327 percent between 2007 and 2011, while production from non-shale gas wells has actually fallen by 20 percent.
It’s estimated that the Haynesville shale holds some 60 trillion cubic feet of gas. In fact, the U.S. Energy Information Administration claimed the Haynesville actually beat out the Barnett for the title of the nation’s highest-producing shale gas deposit as far back as March 2011.
However, this year isn’t going nearly as well for the Haynesville. Given that natural gas remains below $4 whereas crude oil continues to command over $100 a barrel, it’s natural that oil and gas developers are focusing more closely on so-called “liquids-rich” shale plays such as that of the Eagle Ford in Texas.
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On the other hand, of course, the Marcellus shale continues to produce enormous bounties; the EIA has estimated it holds some 141 trillion cubic feet in gas reserves. As of 2012, it’s been reported that the Marcellus could actually contain just about half of all the proven natural gas reserves in the nation. So shale gas certainly hasn’t petered out.
Over in the Haynesville, the most active areas have tended to be the parishes of Caddo, Bienville, Bossier, Desoto, Red River, and Webster. As an investor, you’d do well to watch out for emerging activity in any of these areas.
Moreover, there’s a lot to look into in terms of what prices landowners are receiving for leases, as well as the local industry impact of burgeoning exploration and production operations. Landowners have certainly been getting handsome values for selling leases, and major oil and gas operators have continued to lease property up in northern Louisiana.
Once considered too uneconomical to really explore, the advances in shale technologies have made the Haynesville a real prospect once again.
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